UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2004
Commission file number 000-26025
U.S. CONCRETE, INC.
A Delaware corporation
IRS Employer Identification No. 76-0586680
2925 Briarpark, Suite 500
Houston, Texas 77042
(713) 499-6200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes þ No ¨
As of the close of business on November 8, 2004, U.S. Concrete, Inc. had 29,047,080 shares of its common stock, $0.001 par value, outstanding.
INDEX
| Page No. | ||
| Part I – Financial Information |
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| Item 1. Financial Statements |
||
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
18 | |
| 19 | ||
| Part II – Other Information |
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| 20 | ||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
20 | |
| 21 | ||
| 22 | ||
| 23 | ||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 25,348 | $ | 7,111 | ||||
| Trade accounts receivable, net |
85,797 | 64,086 | ||||||
| Inventories, net |
20,450 | 18,104 | ||||||
| Prepaid expenses |
3,160 | 2,566 | ||||||
| Other current assets |
24,786 | 17,604 | ||||||
| Total current assets |
159,541 | 109,471 | ||||||
| Property, plant and equipment, net |
118,760 | 121,022 | ||||||
| Goodwill |
165,265 | 165,226 | ||||||
| Other assets |
11,120 | 5,255 | ||||||
| Total assets |
$ | 454,686 | $ | 400,974 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Current maturities of debt |
$ | — | $ | 13,610 | ||||
| Accounts payable and accrued liabilities |
71,313 | 57,920 | ||||||
| Total current liabilities |
71,313 | 71,530 | ||||||
| Debt, net of current maturities |
200,988 | 141,429 | ||||||
| Other long-term liabilities |
15,180 | 11,304 | ||||||
| Total liabilities |
287,481 | 224,263 | ||||||
| Commitments and contingencies (Note 9) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
29 | 29 | ||||||
| Additional paid-in capital |
166,716 | 164,123 | ||||||
| Retained earnings |
4,279 | 14,845 | ||||||
| Treasury stock, at cost |
(280 | ) | — | |||||
| Unearned compensation |
(3,539 | ) | (2,286 | ) | ||||
| Total stockholders’ equity |
167,205 | 176,711 | ||||||
| Total liabilities and stockholders’ equity |
$ | 454,686 | $ | 400,974 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
| Three Months Ended September 30 |
Nine Months Ended September 30 | ||||||||||||
| 2004 |
2003 |
2004 |
2003 | ||||||||||
| Sales |
$ | 148,252 | $ | 140,885 | $ | 377,193 | $ | 350,562 | |||||
| Cost of goods sold before depreciation, depletion and amortization |
118,157 | 112,674 | 309,108 | 288,653 | |||||||||
| Gross profit before depreciation, depletion and amortization |
30,095 | 28,211 | 68,085 | 61,909 | |||||||||
| Selling, general and administrative expenses |
11,533 | 10,689 | 33,899 | 31,619 | |||||||||
| Depreciation, depletion and amortization |
3,170 | 3,278 | 9,351 | 9,016 | |||||||||
| Income from operations |
15,392 | 14,244 | 24,835 | 21,274 | |||||||||
| Interest expense, net |
4,134 | 4,128 | 12,247 | 12,407 | |||||||||
| Loss on early extinguishment of debt |
— | — | 28,781 | — | |||||||||
| Other income, net |
207 | 314 | 769 | 718 | |||||||||
| Income (loss) before income taxes |
11,465 | 10,430 | (15,424 | ) | 9,585 | ||||||||
| Income tax provision (benefit) |
3,478 | 4,186 | (4,858 | ) | 3,834 | ||||||||
| Net income (loss) |
$ | 7,987 | $ | 6,244 | $ | (10,566 | ) | $ | 5,751 | ||||
| Basic and diluted net income (loss) per share |
$ | 0.28 | $ | 0.22 | $ | (0.37 | ) | $ | 0.21 | ||||
| Basic common shares outstanding |
28,279 | 28,172 | 28,202 | 27,947 | |||||||||
| Diluted common shares outstanding |
28,792 | 28,265 | 28,202 | 28,002 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Nine Months Ended September 30 |
||||||||
| 2004 |
2003 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | (10,566 | ) | $ | 5,751 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operations: |
||||||||
| Loss on early extinguishment of debt |
28,781 | — | ||||||
| Depreciation, depletion and amortization |
9,351 | 9,016 | ||||||
| Debt issuance cost amortization |
1,035 | 1,142 | ||||||
| Net gain on sale of property, plant and equipment |
(318 | ) | (26 | ) | ||||
| Deferred income taxes |
(1,271 | ) | 5,141 | |||||
| Provision for doubtful accounts |
703 | 680 | ||||||
| Provision to write down inventories |
— | 1,137 | ||||||
| Stock-based compensation |
820 | 88 | ||||||
| Changes in operating assets and liabilities, net of acquisitions |
(13,244 | ) | (9,260 | ) | ||||
| Net cash provided by operations |
15,291 | 13,669 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Property, plant and equipment, net of disposals of $553 and $2,401 |
(5,996 | ) | (6,878 | ) | ||||
| Payments for acquisitions, net of cash received of $1,081 |
— | (5,814 | ) | |||||
| Other investing activities |
(149 | ) | (581 | ) | ||||
| Net cash used by investing activities |
(6,145 | ) | (13,273 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from borrowings |
264,000 | 257 | ||||||
| Repayments of borrowings |
(219,039 | ) | (26 | ) | ||||
| Debt retirement costs |
(25,851 | ) | — | |||||
| Debt issuance costs |
(10,259 | ) | (366 | ) | ||||
| Purchase of treasury stock |
(280 | ) | — | |||||
| Proceeds from exercise of stock options |
110 | — | ||||||
| Proceeds from issuance of common stock |
410 | 640 | ||||||
| Net cash provided by financing activities |
9,091 | 505 | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
18,237 | 901 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
7,111 | 4,685 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 25,348 | $ | 5,586 | ||||
| Supplemental disclosure of investing and financing activities: |
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| Assets acquired in business combination |
$ | — | $ | 7,794 | ||||
| Liabilities assumed in business combination |
$ | — | $ | 2,790 | ||||
| Additions to property, plant and equipment from exchanges |
$ | 788 | $ | — | ||||
| Common stock received in settlement |
$ | 1,000 | $ | — | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of U.S. Concrete and its subsidiaries and have been prepared by U.S. Concrete, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Some information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the SEC’s rules and regulations, although U.S. Concrete believes that the disclosures made are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in U.S. Concrete’s annual report on Form 10-K for the year ended December 31, 2003 (the “2003 10-K”). In the opinion of U.S. Concrete, all adjustments necessary to present fairly the information in its unaudited condensed consolidated financial statements have been included. Operating results for the three- and nine-month periods ended September 30, 2004 are not necessarily indicative of the results expected in the fourth quarter of the year ending December 31, 2004.
The preparation of financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
U.S. Concrete complied with the consolidation requirements of Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51,” as amended, as of March 31, 2004. See note 10.
Other than that compliance with FASB Interpretation No. (“FIN”) 46R, U.S. Concrete has not changed its accounting policies since December 31, 2003. For a description of these policies, refer to note 1 of the consolidated financial statements in the 2003 10-K.
3. STOCK-BASED COMPENSATION
U.S. Concrete accounts for its stock-based compensation plans under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Its consolidated statements of operations do not reflect any stock-based employee compensation cost for its stock option plans if options granted under these plans have an exercise price equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the pro forma effect on net income (loss) and earnings (loss) per share as if U.S. Concrete were to apply the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No.123, “Accounting for Stock-Based Compensation,” as amended, to its stock-based compensation plans for the periods shown (in thousands, except per share amounts).
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net income (loss) – as reported |
$ | 7,987 | $ | 6,244 | $ | (10,566 | ) | $ | 5,751 | |||||||
| Add: Total stock-based employee compensation expense included in reported net income (loss), net of related tax effects |
247 | 24 | 566 | 37 | ||||||||||||
| Deduct: Total stock-based employee compensation expense calculated using the fair value method, net of related tax effects |
(498 | ) | (416 | ) | (1,306 | ) | (1,230 | ) | ||||||||
| Pro forma net income (loss) |
$ | 7,736 | $ | 5,852 | $ | (11,306 | ) | $ | 4,558 | |||||||
| Earnings (loss) per share: |
||||||||||||||||
| Basic and diluted – as reported |
$ | 0.28 | $ | 0.22 | $ | (0.37 | ) | $ | 0.21 | |||||||
| Basic and diluted – pro forma |
$ | 0.27 | $ | 0.21 | $ | (0.40 | ) | $ | 0.16 | |||||||
4
U.S. CONCRETE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(continued)
4. INVENTORIES
Inventories consist of the following (in thousands):
| September 30, 2004 |
December 31, 2003 | |||||
| Raw materials |
$ | 8,665 | $ | 8,218 | ||
| Finished products and supplies |
11,785 | 9,886 | ||||